Trump's tariffs will hurt US economy: Experts

In an open letter to President Donald Trump, Nike, Adidas and other footwear companies in the US have called for the removal of tariffs on shoes made in China, which they say will affect the American economy.
In an open letter to President Donald Trump, Nike, Adidas and other footwear companies in the US have called for the removal of tariffs on shoes made in China, which they say will affect the American economy.PHOTO: REUTERS

WASHINGTON • The United States' escalation of trade tensions with China - compounded by newly enacted and threatened tariffs on Chinese imports - could hurt its own economy and employment, said sources, suggesting that the administration should reverse course.

Ms Nicole Kaeding, vice-president of federal and special projects at the Washington-based Tax Foundation, said the new tariffs represent a total tax increase of US$70 billion (S$97 billion) a year for US consumers, with higher prices for a number of items.

"The tariffs, if kept in place, will reduce the size of the US economy and reduce employment," she said. "Hopefully, the administration reverses course and removes the tariffs, and the Chinese government does the same thing."

Unlike earlier rounds of tariffs - which focused more on industrial and agricultural products - the recently threatened 25 per cent tariffs target roughly US$300 billion worth of Chinese imports, involving mostly consumer products such as toys, clothing and footwear.

Dr Gary Hufbauer, a senior fellow and trade expert at the Peterson Institute for International Economics in Washington, estimated that US tariffs to date - including the latest increase to 25 per cent from 10 per cent on US$200 billion of Chinese imports - will cost a three-person US household US$1,000 a year.

The further escalation which has been threatened would raise that cost to US$2,200 annually, he said.

"At some point, consumers will notice higher prices on imported products, small firms reliant on crucial intermediate imports will shed workers and US exporters will lose sales. All these effects will have a political price," Dr Hufbauer said.

President Donald Trump is betting that higher consumer prices will not sour US voters, amid strong economic growth and the lowest unemployment rate in 50 years. But price hikes could complicate things for him as the 2020 presidential election campaign picks up, The Hill.com, a political news website, reported last Friday.

His comments echo a study in February by Trade Partnership, which estimated that imposing tariffs of 25 per cent on all remaining imports from China - combined with the impact of retaliation - would jeopardise more than two million US jobs and reduce the country's gross domestic product by 1 per cent.

"Further escalation would be counterproductive. It would simply ensure an economic cold war between the US and China, at least until January 2021 and perhaps much longer," Dr Hufbauer said. "This would be a 'lose, lose, lose' proposition."

President Donald Trump is betting that higher consumer prices will not sour US voters, amid strong economic growth and the lowest unemployment rate in 50 years.

 
 
 

But price hikes could complicate things for him as the 2020 presidential election campaign picks up, The Hill.com, a political news website, reported last Friday.

Political science expert Cal Jillson, from the Southern Methodist University in Dallas, said that Mr Trump will be "alert to any loss of support among constituencies he feels he needs for re-election".

In an open letter to Mr Trump, Nike, Adidas and other footwear companies urged him to reconsider the tariffs on shoes made in China, calling the policy "catastrophic for our consumers, our companies and the American economy as a whole".

The letter, signed by 173 firms, was dated Monday and posted on the industry trade association's website.

"On behalf of our hundreds of millions of footwear consumers and hundreds of thousands of employees, we ask that you immediately stop this action," it said.

CHINA DAILY/ASIA NEWS NETWORK, BLOOMBERG

 
A version of this article appeared in the print edition of The Straits Times on May 22, 2019, with the headline 'Trump's tariffs will hurt US economy: Experts'. Print Edition | Subscribe